In my recent Plan for the Unexpected – Organize Your Records article I provided a list of the records to have readily available to assist someone who must assume the role of Power of Attorney or Executor.
In today’s article I touch upon what it entails to act as an Executor and the risks associated when acting in this capacity.
So…You’ve Been Appointed Executor!
All too often a friend or family member will be appointed to act as Executor. Some people reluctantly agree, or graciously accept, without fully realizing the duties an Executor is required to carry out. In addition, many have absolutely no idea of the serious legal ramifications that can arise if the duties and responsibilities carried out are disputed.
Settling an Estate can be a very complicated and time consuming process. Imagine if the Estate being settled requires that assets be disbursed over a protracted time frame. If you were to assume the role of Executor when you are in your 50s or 60s and the disbursement of assets from the Estate is to occur over 20+ years, for example, it is entirely possible you may no longer be around to carry out your duties or, worse yet, you could be in a position where some of your faculties no longer enable you to properly carry out your duties as Executor.
Depending on the magnitude of the Estate over which you have been appointed as Executor you could be faced with a situation where you may need to manage investments over several years. In some cases, there are extensive real estate holdings that will need to be managed. Furthermore, these real estate (and other) assets may be located in different parts of the world!
Imagine if, in addition to owning properties in various parts of the world, these properties are rental properties in which you must collect rental payments.
As you can well imagine, some Estates can be extremely complex and acting as Executor would not be for the faint of heart!
Acting as Executor can be extremely time consuming. Once again, it comes down to the complexity of the Estate. Not everyone has the luxury of being able to suddenly come up with all the time required to carry out the duties and responsibilities of an Executor.
Family dynamics can also interfere with your ability to act as Executor. Imagine if there is so much animosity amongst family members that coming to a mutual consensus of anything is extremely difficult and time consuming.
Your ability to properly act as Executor may also be hampered by your own emotions. If you are mourning the loss of a loved one, your ability to make rational decisions may be impaired.
If you fail to correctly carry out your duties you are at risk of being personally liable at considerable cost. In fact, depending on the size of the Estate, there can be upward of 70 individual tasks expected of an Executor, some of which can carry a liability risk.
Stories abound where Executors have unwittingly make mistakes when winding up an Estate, the beneficiaries have suffered a loss, and they take legal action against the Executor to recover their losses.
Extreme caution must also be exercised since beneficiaries and creditors can emerge demanding payment subsequent to the disbursement of funds from the Estate. In this case, the Executor may be personally liable to creditors if the beneficiaries refuse to, or are unable to, pay the deceased’s liabilities.
In some cases, the Executor’s liability is not limited to the distribution of assets to beneficiaries. If the deceased was a tenant, for example, then the Executor would be responsible to ensure the terms and conditions of the deceased’s rental agreement(s) were fulfilled.
An Executor is also responsible for completing self-assessment tax returns during the administration of the Estate and for the payment of assessed tax.
Undoubtedly, there will be instances where the Executor is totally unaware of the existence of a creditor. In most cases, publishing statutory notices will protect Executors.
If an Executor omits beneficiaries from distribution because they are unaware of their existence or whereabouts, insurance or protection from the Court may be available to Executors in this difficult position.
The risks can be so high it is no wonder that Estate Risk Assurance is an insurance offering.
If you have been appointed Executor and realize you are unable to properly carry out the required duties for whatever reason, you may wish to engage the services of a Trust company.
If an Estate is complex and/or the distribution of assets is to occur over a protracted period of time, it might have been wise for a Trust company to have been designated as Executor in a Will. If, however, this was not the case and you have been appointed Executor, you may wish to engage the services of a Trust company to assist you in your duties and responsibilities as Executor.
As Executor, your decisions will still be required. The Trust company, however, will handle all the duties and responsibilities on your behalf. An added benefit is that the Trust company will maintain a detailed record of all dealings with an Estate. This is essential as beneficiaries are entitled to inspect these records.
Fees will apply but these are negotiated on the basis of the size and complexity of the Estate.
If the value of the Estate is relatively small (you would need to speak with the Trust company to ascertain their minimum threshold) it is entirely possible the Trust company may recommend an alternate service provider.
There are a host of factors which can negatively impact your ability to carry out the duties and responsibilities of an Executor. In addition, acting as an Executor exposes you to potential liabilities.
As a result, it may very well be worth investigating whether a Trust company would be able to assist you in carrying out your Executor duties and responsibilities once the time comes.
Thanks for reading!
Note: I sincerely appreciate the time you took to read this article. Please send any feedback, corrections, or questions to [email protected]
Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.